The Strategic Value of Free Passage of Oil Through the Strait of Hormuz For the United States

According to a report published by the BBC News January 2, 2012, the Iranian state media reported the test-firing of three missiles as part of their recent naval exercises designed to show the ability to blockade the Strait of Hormuz. These missile firings support recent threats by the Iranian government to block the free passage of ships carrying oil through the Strait of Hormuz. The Iranian government claims to have the naval power to enforce such a blockade. The United States government has dismissed this threat as the normal rhetoric the Iranian government publishes in response to threats of sanctions by the European nations and the United States. When the State Department spokesperson Mark Toner was asked about the Iranian threats in a news conference on December 27th, he made the following comment.

Well, you know I spoke about the naval maneuvers last week, and they’ve done this before. We don’t really have an opinion one way or another for whether a country wants to exercise its navy. That’s for it to do. We certainly exercise our own. But in terms of their comments about the Strait of Hormuz, I just think it’s another attempt by them to distract attention away from the real issue, which is their continued noncompliance with their international nuclear obligations. We’ve been very clear the path we’re pursuing, which is a – the two roads, if you will, of sanctions and increased sanctions and pressure on Iran if it continues not to comply. But the other path is one towards greater openness and engagement with the West if it does comply. That hasn’t changed.

A number of important questions come from this verbal confrontation between the United States government and the Iranian government. Does the Iranian Navy actually have the ability to enforce a blockade of the Strait of Hormuz? What would the United States response be to a blockade attempt, and is the free flow of oil through the Strait of Hormuz of significant enough value to take the risks involved in a naval confrontation? In an article by Radio Free Europe/Radio Liberty Dated December 29, 2011, Michael Eisenstadt of the Washington Institute for Near East Policy stated the Iranians could only block the Straits for about a week.

Eisenstadt says if Iran does succeed in blocking the strait, it could only do so for about a week. “The bottom line is, although the Iranians have been talking a long time about closing the Strait of Hormuz, they probably only have the ability to do so for several days,” he says. “And once the United States Navy gets involved in ensuring freedom of navigation, I think it’s very clear that the outcome will be, eventually, the destruction of the Iranian Navy and the reopening of the strait.”

In response to Iranian threats to close the Strait of Hormuz, “Bahrain-based U.S. 5th Fleet’s spokeswoman warned that any disruption “will not be tolerated.” The spokeswoman, Lt. Rebecca Rebarich, said the U.S. Navy is “always ready to counter malevolent actions to ensure freedom of navigation”. Clearly, the United States military forces in the region have the resources to quickly reopen the Strait of Hormuz if the Iranians attempt a blockade. Any attempt by the Iranian Navy to set up a blockade would lead to the complete destruction of their naval forces in the area.

On January 3, 2012, Pentagon Press Secretary George Little indicated the closure of the Strait of Hormuz “will not be tolerated.” Mr. Little went on the make the following comments concerning the free passage of United States Naval vessels through the Strait.

Such regularly scheduled movements are in accordance with longstanding U.S. commitments to the region’s security and stability, and in support of ongoing operations,” Little told reporters.

Such carrier strike group deployments are needed to maintain continuity and operational support to ongoing missions in the U.S. Central Command area of responsibility, he added.

“Our interest is in safe and secure maritime passage for ships transiting the Strait of Hormuz,” Little said.

“No one in this government seeks confrontation over the Strait of Hormuz,” he added. “It’s important to lower the temperature.”
The deployment of U.S. military assets in the Persian Gulf region will continue as it has for decades, the Pentagon press secretary said.

What is the strategic value of oil passing through the Strait of Hormuz for the United States? According to data provided by the U.S. Energy Information Administration, “15.5 million barrels of oil a day passed through the Strait of Hormuz in 2009. Flows through the Strait in 2009 are roughly 33 percent of all seaborne traded oil (40 percent in 2008), or 17 percent of oil traded worldwide.”

Oil prices surged 4% today because of Iran’s continued threats to take military action against American naval assets that may pass through the Strait of Hormuz. It is clear that world oil prices will continue to spike if there was a disruption of oil through the Strait of Hormuz for even a few days. A naval conflict between the United States and Iran could easily expand into a wider regional conflict. A conflict would undoubtedly drive gasoline prices in the United States back up toward the four dollar a gallon level, which would have significant impact on our economy. Beyond the U.S. economy, escalating fuel prices throughout the world could wreak havoc upon already struggling economies in Europe and Asia. The bottom line is then, although the Iranian threats may be nothing more than scare tactics, they do have the effect of creating uncertainty in oil prices in both the short and long term.

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